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Amsterdam Business School

The effect of incentive satisfaction on employee’s motivation:

The mediating role of interpersonal satisfaction

Name: Krisztina Kiss

Student number: 11086521

Thesis supervisor: Dr. ir. Sander van Triest Date: 20 June 2016

Word count: 13978, 0

MSc Accountancy & Control, specialization Control

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Statement of originality

This document is written by student Krisztina Kiss who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

This paper examines the relationship between incentive level satisfaction and four types of motivation and focuses on the role of interpersonal satisfaction as a mediating link between these two variables. Results suggest that the satisfaction of co-workers and supervisor in majority does not mediates the relationship, however the satisfaction of supervisor has a significant effect on the relationship between non-monetary incentives and extrinsic motivation.

Besides intrinsic and extrinsic motivation, literature differentiates four other types of motivation: integrated, identified, introjected and external regulation. In my research I include intrinsic, identified, introjected and extrinsic motivation. Interpersonal satisfaction is divided into the satisfaction with the supervisor and the satisfaction of co-workers and they are tested for mediation.

This paper has implications for the management of compensation packages because promoting the quality of the relationship between managers-employees and employees-employees are relatively cheap and it turns out to significantly influence the employees-employees’ motivation.

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Contents

1. Introduction ... 5 2. Theoretical background ... 8 2.1. Incentives ... 8 2.1.1. Agency theory ... 9 2.1.2. Expectancy theory ... 10 2.1.3. Monetary incentives ... 11 2.1.4. Non-monetary incentives ... 12 2.2. Motivation ... 12 2.2.1. Maslow’s hierarchy ... 13 2.2.2. Types of motivation ... 13 2.3. Interpersonal satisfaction ... 14 2.3.1. With supervisor ... 15 2.3.2. With co-workers ... 16 2.4. Hypotheses development ... 17 3. Methology ... 20 3.1. Data collection ... 20 3.2. Variable measures... 20 3.3. Data analysis ... 21 3.3.1. Factor analysis ... 22 4.3.2. Demographic statistics ... 24 4.3.3. Descriptive statistics... 26 4.3.4. Correlation ... 27 4.3.5. Regression analysis ... 29

4. Conclusion and limitation ... 35

4.1. Conclusion ... 35

4.2. Contribution and implications ... 36

4.3. Limitations and suggestions for research ... 37

5. References ... 38

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1.

Introduction

This paper investigates the association between incentive level satisfaction (monetary and non-monetary benefits) and work motivation and examines the mediating effect of the employee’s interpersonal satisfaction within the organisation on the relationship between these constructs. The reason why managers put emphasis on incentives is because of the misalignment of goals of the company and the employees. A widely studied means of aligning interest is making the employees’ income contingent on objectives set by the employer, for example rewarding outstanding performance with annual bonus, promotion and so on. Several empirical studies have already been conducted on how incentive satisfaction affects employee’s performance (e. g. Williams et al., 2006). The results show a significant presence of positive relationship. The level of compensation is one of the most important job attributes to individuals (Jurgensen, 1978). Although financial rewards are powerful to promote alignment, they are not the only tool or most efficient option to motivate employees. For example organisations can provide intrinsically interesting work (Delfgaauw, 2007) or an inspiring boss (Dur et al. 2010) can have a positive effect on employees’ motivation. Non-monetary benefits (or fringe benefits) are also essential in attracting a productive workforce. Some firms realized that benefits are effective tools to increase the willingness of candidates to accept job offers (Wojcik, 1998). Many skilled labourers will not accept a position that does not offer at least a simple benefits package. These packages can have effects for key outcomes like job satisfaction, motivation, employee commitment, identification and job performance. If employees do not feel that an organization is treating them fairly with respect to basic needs (food, money for retirement), then they are likely to be less satisfied with their jobs, perform at a lower level or leave. Those who do not feel their basic needs are met may also fail to reach higher levels of motivation. I regard this relation important as non-monetary benefits play a significant role in motivating employees and since their marginal cost is relatively low it is rewarding for both the firm and its employees. Voluntarily turnover and unhappiness with job is a problem that managers face (globally 45% of employees are not happy in their current job and 43% frequently think about quitting according to Kelly Global Workforce Index (2013)) and the reason for that can be that their needs are not satisfied.

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6 According to Maslow’s hierarchy of needs (Maslow, 1968), humans need to feel love and acceptance from social groups, need to belong to somewhere. Interpersonal relationship is the one’s attitude toward the partner and the relationship between them. The satisfaction of interpersonal relationship comes from both the quality of the relationship and the partners’ perception of one other (Beatty & Dobos, 1992). With respect to job decision latitude, it seems that the most relevant aspect of the environment deals with the social relationships between the worker and his or her co-workers and supervisor (Ilgen and Hollenbeck, 1991).

Berkowitz (1956) found that interpersonal satisfaction plays a positive role for motivation. However, other results suggest that under certain conditions it can have a negative effect (Lott and Lott, 1965). According to Fiedler (1953) “quite in contrast to therapeutic and social relations, we find that psychological closeness and warmth in key members of small groups seems to be a detriment to effective team work…” under conditions where teams “want to get a job done”. Therefore as it is likely to not have a direct effect on motivation or performance but a mediating role (Oldham, 1975). He calls for need of research in this field and it provides a high motivation for my thesis.

Therefore, my research question is whether the higher satisfaction of incentives leads to a higher intrinsic and extrinsic work motivation and if the interpersonal satisfaction moderates this relationship.

FIGURE 1 Research question

Interpersonal satisfaction - with supervisor - with co-workers Motivation - Intrinsic motivation - Identified motivation - Introjected motivation - Extrinsic motivation Incentive level satisfaction

- monetary - non-monetary

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7 First, I will test if there is a significant relationship between incentive level satisfaction and the types of motivation (intrinsic, identified, introjected and extrinsic). Second, I will examine if interpersonal satisfaction mediates the association between these two construct. The study contributes to the research of incentives and motivation and gives a little extra by taking interpersonal satisfaction into consideration. Although a large amount of research has focused on executive compensation, little is known about the compensation for workers (Herpen et al. 2003).

The interpretation may be relevant for managers since if the relationship between the employees or the relationship between the manager and the employees have a positive moderating effect on motivation, then managers can take it into consideration by putting more emphasis on the manager-employee relationship and facilitate the employees’ relationships with each other by providing a pleasant work environment, group works, and teambuilding activities. A strong interpersonal tie among group members may allow to reduce the need for monitoring (Curseu, 2006). This in turn might reduce costs and increase success of reward systems and increase the employees’ motivation and performance.

The structure of the paper is as follows. In this chapter I introduced the problem, formulated the research question and emphasised the relevance of my research. In the next section I will provide a theoretical background regarding the incentives level satisfaction, types of motivation at a workplace, interpersonal satisfaction and the already determined relationships between them. At the end of chapter 2 based on the existing literature I formulate the hypotheses and show the methology and results in the following part. I give a brief summary of my finding in chapter 4 among with the implications, limitations of the study and suggestions for further research.

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2.

Theoretical background

In my research I will have a deeper look in three variables: incentive satisfaction, motivation and the moderating role of interpersonal satisfaction with both the supervisor and the co-workers. Based on extensive literature overview I will build my hypothesis.

FIGURE 2 Overview of the paragraphs of theory and literature  Incentives o Agency theory o Expectancy theory o Types of incentives - Monetary - Non-monetary  Motivation o Maslow-pyramid o Types of motivation  Interpersonal satisfaction

o Relationship with co-workers o Relationship with supervisor  Hypothesis development

2.1.

Incentives

Incentives are the key tools from managers to get desired behaviour from employees. It is used as a reward to support congruence between the employees’ and the firm’s goals. Compensation systems have long been considered as a factor impacting organizations’ ability to attract and retain employees (e.g. Bretz et al. 1989). The various types of benefits defined in accounting standard IAS 19 Employee Benefits. In the standard benefits are defined as: “Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.” There are various types of benefits according to IAS 19: short-term, post-employment, other long-term and long-termination benefits. As far as short-long-term benefits are concerned we can distinguish (1) monetary (cash) (2) non-monetary tangible (rewards such as restaurant coupons for meals or vacation trips) and (3) non-monetary intangible (“employee of the week” recognition, positive performance reviews and public praise from management (Condly, Clark and Stolovitch, 2003. pp.49)

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9 Pay level would most strongly predict pay level satisfaction. Pay satisfaction represents an attitude and has been defined by Miceli and Lane (1991) as the “amount of overall positive or negative affect (or feelings) that individuals have toward their pay” (p. 246), therefore it reflects a discrepancy between the level of benefits the employee receives and the level that the employee feel he or she should get. He also adds that individuals’ preferences for specific benefits are expected to vary with their lifestyles and needs: demographic and background factors such as age, marital status, and previous benefit history. Each individual values benefits differently and benefits represent more than simply a monetary value (Weathington and Jones 2006). Oshagbemi (2000) found that pay affects employees’ overall level of job satisfaction and primary work behaviours. The compensation offered largely influences the ability to motivate workers and retain desired employees. As related to the effect on employees, critical employee attitudes, behaviours, continued organizational membership, and reciprocity toward the organization are strongly influenced by incentives (Dulebohn and Werling, 2007).

According to the framework of Ferreira & Otley (2009) the reward systems plays an essential role in management control systems. The link between incentives and motivation has received a lot of attention in management studies and psychological literature in which most of them refer to monetary incentives and the effect on intrinsic/extrinsic motivation and work performance. Most research on incentives relies on agency theory (Ross, 1973) and expectancy theory. Agency theory and expectancy theory are kinds of utility based theories which is based on the fact that the individuals are rational, so they act in their own self-interest to maximize utility. It assumes that the agent derives no utility from actually performing the task.

2.1.1. Agency theory

Basic agency theory (i.e. Baiman, 1982) addresses the problem that arises when firm-owners (principals) delegate authorities to managers (agents). The theory suggests that there is a conflict between the principal and the agent because both want to maximize their own wealth and there is good reason to believe that the agent will not always act in the best interests of the principal. (Jansen and Meckling, 1976) Agency theory is concerned with two

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10 problems. The first is that the desires or goals of the principal and the agent conflicts (goal incongruence) and it is difficult or expensive for the principal to verify what the agent is actually doing, in other words there is an information asymmetry between the principal and the agent, as the principal does not know to what degree the agent is pursuing and achieving the principal’s goals. The second is the problem of having different risk preferences, it is when the principal and agent have different attitudes toward risk and prefer different actions (Eisenhardt, 1989). Agency theory provides especially relevant implications for compensation designs. In order to align the goals and objectives of the principal and the agent and reduce agency cost, contracts are set. The principal must choose appropriate measures to evaluate the agent’s performance and link it with his or her compensation and incentives so that it motivates the agent to perform in the best interest of the principal. Eisenhardt proposed that when a contract is outcome-based (e.g. commissions, stock exchange), the agent is more likely to behave in the interest of the principal as if profits are high the agent’s compensation goes up. The other type of contract is the oriented contract (e.g. merit pay). However, if the contract is behaviour-oriented, the principal must be able to overcome the information asymmetry by putting more emphasis on monitoring and a variety of other factors including information systems and therefore, it can lead to less performance-contingent pay.

2.1.2. Expectancy theory

Expectancy is the belief that one's effort will result in attainment of desired performance goals. The expectancy theory also focuses on the link between rewards and behaviour but it “emphasizes the needs for organisation to relate rewards directly to performance and to ensure that the reward provided are those rewards deserved and wanted by the recipients” (Montana and Charnov, 2008). It means that the employee expects (rather than experienced) that if he provides a better (desired) job performance it will be rewarded and that should motivate him. The motivation of the behaviour selection is determined by the desirability of the outcome. However, it is not the same how the individual processes the different motivational elements, the theory says that motivation is a function of valence, instrumentality and expectancy, therefore it is essential to provide a reward that is valued

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11 by the employee. The main influence of incentives is on instrumentality, it is the effect of payments on behaviour. Valence is the degree of personal attractiveness of the rewards that follow achievement of the organizational outcome or performance for the individual stakeholders (Purvis et al. 2015). Expectancy differs among employees, it has more to do with employee selection, job design and trainings (Human Resource Management, 2015).

2.1.3. Monetary incentives

The reason why most people work is because they depend on salary and wages to earn a living. While intrinsic factors play an important role in employees’ decision to remain employed, compensation plays a central role. Attracting and retaining workforce is directly linked to compensation offers (Dulebohn and Werling, 2007). Agency theory focuses on the provision of monetary benefits. IAS 19 outlines employee benefits including short-term benefits (e.g. wages and salaries, annual leave, compensated absences, bonuses), post-employment benefits such as retirement benefits, other long-term benefits (e.g. long service leave and termination benefits). Moreover, within the scope of IFRS 2 we can mention share-based payments such as stock options.

Rhoads (1985) argues in his article that despite the formal openness of welfare economics, in practice economists generally over-emphasize the importance of money both as a human motive and a source of happiness. Each organisation should find the trade-off between monetary and non-monetary incentives. However, two aspects are quite important in determining the compensation package. The first one is the budget the organisation has. Because the marginal cost of non-monetary incentives is lower than the cost of monetary incentives, it can be rewarding to carefully select some (e.g. recognition from supervisor, use of recreational facilities and worker of the month nomination). Research conducted by the report of Income Data Services (1999) suggests that non-financial recognition schemes can help fulfil organisational objectives at a relatively low cost, besides being cost-efficient, the symbolic value of the awards that matters. Furthermore, the preferences of the employees should be taken into account as the incentives functions as motivators, therefore it should be align with their expectancies.

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12 Consistent with the widely held view that compensation packages affect the attraction of employees, the study of Barton and Lois (2000) found support that the components of the compensation package affects individuals’ attraction to a position. They found in their research that “more is better”.

2.1.4. Non-monetary incentives

Non-monetary incentives are those compensations that do not involve cash. Opportunities to participate in important decision-making processes, recognition from superiors, more time off, trainings and opportunities to develop their skills, praise, job security are some of the examples of non-financial rewards provided by Merchant (1998), p.427.

Ryan et al. (2000) obtain that monetary incentives are not enough for employees but physiological and safety needs are necessary to retain workforce. Non-monetary incentives are essential because they try to link the worker with the firm. They can be strong motivators because they increase the intrinsic capabilities of the worker (Sorauren 2000). Similarly to Sorauren, Frey (1997) concludes that the provision of non-monetary benefits can even be more effective in aligning interest by pushing on intrinsic work motivation as non-monetary benefits disassociate the reward from its related performance.

2.2.

Motivation

Mitchell (1982) defines motivation as the degree to which an individual wants and tries to do well at a particular task or job. The work motivation form important aspects of efficient and effective management system since it enhances the employee’s intention to do well at a particular job.

Work motivation is a set of energetic forces that originates both within as well as beyond an individual’s being to initiate work-related behaviour and to determine its form, direction, intensity, and duration (Pinder 1998, p. 11). Latham and Pinder (2005) identified exogenous sources of motivation (e.g., organization climate and culture, leadership, groups and teams). An interesting research was carried out by Lindner (1998). His questionnaire asked

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13 participants to rank the importance of ten factors that motivated them in doing their work. The ranked order of motivational factors were: (1) interesting work, (2) good wages, (3) full appreciation of work done, (4) job security, (5) good working conditions, (6) promotions and growth in the organization, (7) feeling of being in on things, (8) personal loyalty to employees, (9) tactful discipline and (10) sympathetic help with personal problems. A study of industrial employees, conducted by Kovach (1987), yielded the following ranked order of motivational factors: (1) interesting work, (2) full appreciation of work done, and (3) feeling of being in on things. Another study of employees, conducted by Harpaz (1990), resulted in the following ranked order of motivational factors: (1) interesting work, (2) good wages, and (3) job security. Knowing what motivates employees and incorporating this knowledge into the reward system will help recruiting, employing, training and retaining a productive workforce.

2.2.1. Maslow’s hierarchy

To introduce motivation I use Maslow’s hierarchy of needs (Maslow, 1968). He distinguishes five stages of motivation factors in a hierarchical order where psychological needs are the most basic needs (e.g. air, food, sleep), safety is the second (e.g. security, law), followed by social (e.g. relationships, love), the fourth is esteem needs (e.g. achievements, reputation) and the final need is self-actualization (personal growth and fulfilment). People are eager to satisfy their needs and once one need is satisfied, they seek for another one and so on until their reach the top self-actualization need. In my thesis I will put emphasis on social motivation as interpersonal relationships within the organisations drive people’s need for belongingness.

2.2.2. Types of motivation

Porter and Lawler (1968) distinguished intrinsic and extrinsic motivation. Intrinsic motivation means that people find interesting what they do and that leads to a spontaneous satisfaction with their job. Extrinsic motivation on the other hand, requires an instrument

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14 between the activity and the consequences of the activity, for example a reward. So the satisfaction in this case comes from the extrinsic consequence of performing well.

Gagné and Deci (2005) used the self-determination theory (SDT, Deci & Ryan 1985b) in order to distinct four other types of motivation other than intrinsic and extrinsic. Self-determination theory is a theory of human motivation. It examines how social contexts and individual differences facilitate different types of motivation, especially autonomous motivation and controlled motivation, and in turn predict learning, performance, experience, and psychological health (Gagné et al. 2010). Central to self-determination theory is the distinction between the previously mentioned autonomous motivation and controlled motivation. Autonomy involves the employees’ own volition and having the experience of choice (intrinsic is autonomous motivation) while controlled motivation means acting with a sense of pressure, a sense of having to engage in the actions (extrinsic motivation). Self-determination theory is further divides motivation into four types (i.e., external, introjected, identified, integrated) that vary in the degree to which motivation has been internalized, in other words: how well it is assimilated with someone’s existing self-regulations, such as values and interests that he or she already holds.

Externally regulated motivation is the classic type of extrinsic motivation and is a prototype of controlled motivation. People act because they want to obtain a desired consequence or avoid a punishment. (e.g., I work when the boss is watching). Introjected regulation is within the person but is a relatively controlled form of internalized extrinsic motivation (e.g., I work because it makes me feel like a worthy person). We talk about identified motivation when people identify with the value of a behaviour for their own self-selected goals (e.g. I work because I believe my work is valuable). As a consequence of the highest degree of internalization we distinguish the integrated regulation which allows extrinsic motivation to be truly autonomous, involves the integration of an identification with other aspects of oneself (e.g. I work because it is a big part of who I am).

2.3.

Interpersonal satisfaction

Social relationships are an important part of everyday life. As noted by Frone (2000), ‘‘Humans are, by their very nature, social beings. We are born into families and eventually

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15 become members of larger collectives, such as schools, churches, and work organizations” (p. 246). According to Miller (2012) relationship satisfaction is based on three factors: rewards, costs and comparison levels. Rewards are anything that is positive for the relationship. Adversely, costs are the negative aspects of the partner or their relationship. Comparison level refers to what each partner expects of the relationship. The comparison level is influenced by experienced relationships and general relationship expectations they are taught by family and friends.

Most organizations actively promote social interaction among their personnel; examples range from the facilitation of coffee corners to offering joint holiday trips (e.g. Cohen and Prusak 2001) Productivity can be higher when employees are satisfied with their relationships in the workplace, what is more, they may be willing to accept a job that offers a lower wage but more pleasant, friendly atmosphere.

Communication and trust are factors that describe interpersonal relationships. Mayer et al. (1995) defines trust as "the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other party will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party" (p. 712) When employees trust in their supervisor, they are more likely to engage in feedback-seeking behaviour which enhances their job performance.

2.3.1. With supervisor

Interpersonal relationship between employees and their managers is one of the most important types of identification in the workplace (Kark and Shamir 2002). Leadership theory emphasizes that leaders try to move systems towards obtaining desired results of the organization by creating relationships with followers that influences their commitment (Bass, 1990) Leader-member exchange theory focuses on the relationship or interaction between both leaders and followers. The study of Stringer (2006) encompasses the previously mentioned theory with regard to the quality of the supervisor–employee relationship and the level of the employee’s job satisfaction. There is support for the hypothesis that high quality supervisor– employee relationships are positively related to extrinsic job satisfaction. Moreover, the results indicate there is a significant positive

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16 correlation between high quality employee–supervisor relationships and intrinsic job satisfaction. “When employees have a high quality relationship with their supervisor they get to enjoy the benefits of favours such as mutual trust, support from their supervisor, effective communication, consideration, and esteem, and consequently, they more likely will be satisfied with their job.” (Stringer, 2006 p.136).

The survey of Kelly Global Workforce Index (2013) on the topic of Employee Engagement and Retention looks in some depth at the employee-employer relationship. Globally 63% of respondents say that their direct managers have a significant impact on the level of their satisfaction and engagement. They asked the respondents about what the manager needs to do to improve satisfaction or level of engagement. The primary answer was opportunity for more training and skills development, followed by the need for managers to better clarify the responsibilities, goals and objectives of those under their direction. The third item was the need for more transparency in communications between employees and managers.

2.3.2. With co-workers

Azeem and Quddus (2014) studied the association between work motivation, job satisfaction with special reference to interpersonal relations among the non-teaching staff in India. They claim that maintenance of a positive interpersonal relations may be helpful for the staff for a more efficient and effective share of duties and hence performance.

Lott and Lott (1965) evaluated group cohesiveness as interpersonal attraction. He found that group cohesiveness depends on numerous variables such as characteristics, democracy, status congruence, demographic background, behaviour and so on. A number of studies have supported that the interpersonal attraction or satisfaction is a positive function of interaction. For example Bovard (1951a) concluded that the interpersonal attraction toward individual group members and the towards the whole group will increase significantly more in group-centred classes where verbal interaction is encouraged than in leader-centred classes. Another study by Gullahorn (1952) found that distance was the single most important factor determining rate of interaction between any two employees – if people interact frequently they are more likely to develop friendship.

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2.4.

Hypotheses development

The current section attempts to link the satisfaction of monetary and non-monetary incentives, types of motivation and interpersonal satisfaction with the supervisor and co-workers. Incentives are the most frequently used variables for motivation and job performance. Although the research on interpersonal relationships are more common in psychological and behavioural studies, in it also plays an important role in management control.

Various authors (e.g. Nicola, Paola 2015; Ryohei, Norimasa 2008) found in their research that incentives do impact the motivational level of employees. The researchers advocated structuring the work environment so that effective performance would lead to both intrinsic and extrinsic rewards which would in turn produce total job satisfaction. Early studies testing the additivity of intrinsic and extrinsic rewards found that tangible extrinsic rewards undermined intrinsic motivation whereas verbal rewards enhanced it (Deci, 1971), thus implying that intrinsic and extrinsic motivation can be both positively and negatively interactive rather than additive. Along with several authors, Amabile et al. (1976) also found that external factors such as tangible rewards tend to undermine intrinsic motivation.

H1: The level of incentive satisfaction is positively associated with the employee's overall motivation.

H2: The association between the level of monetary incentive satisfaction and motivation is more positive for extrinsic motivation than for intrinsic motivation.

H3: The association between the level of non-monetary incentive satisfaction and motivation is more positive for intrinsic motivation than for extrinsic motivation.

A positive relationship is assumed between individuals' interpersonal satisfactions at work and their motivation (Seashore, 1954; Berkowitz, 1956). Oldham (1975) found that there is a significant, positive correlations between the job characteristics and intrinsic motivation for those employees who are highly satisfied with their immediate supervisor and co-workers.

Studies examining the effects of rewards on intrinsic motivation conclude that the interpersonal climate has a significant influence on the rewards' effects. Ryan, Mims, and Koestner (1983), conducted an experiment to test reward contingency on performance and

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18 its association with intrinsic motivation. They found that performance-contingent rewards, like all other rewards, when the interpersonal context was supportive rather than pressuring, undermined intrinsic motivation relative to comparable feedback without rewards. In their study the mediating role of interpersonal context which was either informationally administered or controlling did have an effect on the variables.

Hackman and Oldham (1975) argued that the most effective means of motivating individuals is through the optimal design of jobs which includes for example skills variety, autonomy and dealing with others: the degree to which the job requires the employee to work closely with other people in carrying out the work activities. In addition to their research Oldham (1975) added interpersonal satisfaction as a moderating variable and found support for the positive correlations between job characteristics and intrinsic motivation for employees in the high co-worker satisfaction group and employees in the high supervisory satisfaction group.

H4: The satisfaction of interpersonal relationships is positively associated with the employee’s intrinsic motivation.

Supportive findings for the positive association between interpersonal satisfaction and performance may be cited from several experimental investigations. However, as previously mentioned, some studies resulted in a negative relationship (e.g. Lott and Lott, 1965). Therefore, based on the several outcomes, researchers concluded that interpersonal satisfaction plays a mediating role rather than an independent factor.

The theory of equalizing differences (Rosen 1986) predicts that workplaces that have better co-worker relations are associated with a lower wage. The results of Borzaga and Depedri (2005) provide evidence for this negative relation between co-worker satisfaction and wages in the Italian non-profit sector.

The PhD thesis of Sol (2011) studies the interaction between co-worker relations and the financial incentives that are offered. He highlighted that the principal can stimulate social interaction by offering team rewards or relative performance evaluations; in the absence of these incentives, workers do not invest enough in their relationships with co-workers, as the benefits from relationship-building are not fully internalized. He added that „this externality

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19 problem comes at a cost to the employer, as social interaction with colleagues is a valued job attribute: good co-worker relationships allow employers to attract and retain workers for lower wages (Sol, 2011 p.26). However, results suggest various effects of interaction on motivation and performance. Cohn (2010) found that a negative externality in incentives led to a significant drop in productivity when employees could interact with co-workers. Another study by Bandiera et al. (2005) examined the effects of switching from relative performance incentives to individual performance rewards and he found that productivity increased, especially for those workers who worked alongside their friends.

Building on Maslow’s motivation theory that people want to fulfil psychological and safety needs that money can satisfy and social needs by the interpersonal relationships within the organisations, I will test if the latter one mediates the link between the incentives and employee’s motivation.

H5: The relationship between incentive satisfaction and motivation is more positive when the satisfaction of interpersonal relationships is higher.

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3.

Methology

In this section I will cover the data collection. Then in Chapter 3.2. the measured variables will be explained. In Chapter 3.3. I will pay attention to the reliability of the measures included in the survey and it also covers the data analysis.

3.1.

Data collection

To examine the relation between the variables, I conducted a survey questionnaire to collect data. For this topic I think it is the most appropriate form of research methology. The survey instrument was web-based. Because a lot of people whom I could reach do not speak English, I translated the questionnaire to Hungarian as well and sent that version to the Hungarian-speakers.

In the beginning of the survey I explained the general purpose of the study. Participation in the study was entirely voluntary and all responses were made anonymously. In order to assure the validation of the survey and because individual differences in demographic factors can have an impact on the relationship between the variables, I also included a demographic statistics of the participants in this study (age, gender, industry, type of organization, type of employment contract and tenure). The only criteria that I had regarding the respondents was that they should have working experience. I reached my respondents through university email address, my social network, help of my family and my previous workplace. I sent them e-mail messages with the request to participate and a link to the web page containing the survey. In total I got 162 answers with well-diversified demographic and working experience background, therefore my sample can be regarded as representative. The fact that the sample consists of employees from different organizations positively influences the external validity of the study.

3.2.

Variable measures

This survey questionnaire was developed in accordance with relevant literature. I took the question items from tested sources.

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21 The dependent variable is motivation. To measure the employee’s motivation I used the questionnaire developed by Gagné et al. (2010). The Motivation at Work Scale (MAWS) was developed in accordance with the multidimensional conceptualization of motivation postulated in self-determination theory. It consists of 12 questions covering four different types of motivation at work: intrinsic, identified, introjected and extrinsic. This scale does not include integrated motivation because it has typically been very difficult to psychometrically distinguish integration from identification (Vallerand et al., 1992) and external regulation as it had low internal consistency problems. The amount of motivation is assessed on a 7-point Likert-scale measuring to what extent each statement applies to the individuals ranging from "not at all" to "exactly ".

The independent variable is the incentive level satisfaction. In my survey I adapted both monetary and non-monetary incentive elements by Williams et al.’s (2008) pay level satisfaction scale and as for non-financial rewards I tested some provided by Merchant (1998) such as recognition from manager, trainings, events organised and car provided by the company. The answers were measured on a 7-point Likert-scale where 1 is very dissatisfied, 7 is very satisfied.

The moderating variable is the interpersonal satisfaction. Interpersonal satisfaction (more precisely satisfaction with co-workers and the degree of satisfaction with supervisor) is a widely recognised dimension of job satisfaction among with the satisfaction of the work itself (Wright et al., 2007). Interpersonal satisfaction was measured with six items from the Job Diagnostic Survey that tap satisfaction with co-workers and supervision (Hackman & Oldham, 1975). Research participants responded to these items using a 7-point agree– disagree scale.

3.3.

Data analysis

Seven point Likert-scales were used for the measures of all the variables. The survey items are shown in Appendix 1. The statistical program used for the data analyses and presentation of data in this research is Statistical Package for Social Sciences (SPSS).

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3.3.1. Factor analysis

I conducted a factor analysis to see if for each item there is only one or more underlying factor that might have had an effect on all item scores. It also shows if all the items really belong to the construct that they are supposed to reflect and do not fit better with some other construct. As for determine the loading, I used indicated items that loads more than 0,5.

First, a conclusive factor analysis was run including all the survey items (see Appendix 2). Surprisingly, the pension items and the training items load the same component. And all the non-monetary incentive items are still seems to be divided because of being impure-public or private benefits. Private goods are fully excludable and rival in consumption (Benner and Van Hoomissen, 1991), here the company car. On the contrary, public goods are non-excludability and non-rivalry (Jefferson, 1998). Between these two categories are the goods that are excludable, but non-rival in consumption (impure public goods), here sport facilities and social events. Although there are few item cross loadings, I retained all the items with the assumption that it is the latent nature of the variable. For example the training items and the pension items seem to load the same factor, however, those are supposed to measure different variables, and therefore I do not think that the joint variation would be a threat for my study.

Secondly, I ran a factor analysis for each variable. The variance tables are presented in the Appendix 3. In Table 1 the „loads” of the satisfaction of monetary incentives are shown. It reveals that all the items are measures of one component except for the questions regarding the pensions. Pension is a long-term benefit. Long-term benefits are benefits for services provided in the current period that will not be provided or paid until more than 12 months after the end of that period, include amounts that are not paid until after the employee retires (Alfredson et al., 2009, pp. 594-604), while salary, wages, annual leave and holiday pay are short-term benefits. However, both types are monetary incentives, so I did not regard it as a problem. The final scale has a Cronbach’s alpha of 0,932.

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23 TABLE 1 Factor analysis: monetary incentives

Component

1 2

Size of my current salary. ,871 ,214

My take home pay. ,855 ,264

My current salary. ,860 ,309

My overall level of pay. ,746 ,337

The amount of annual leave. ,854 ,317

My annual leave. ,853 ,312

Size of my leave/holiday pay. ,729 ,045

My leave/holiday pay. ,729 ,177

My pension plan. ,249 ,908

Amount the organization pays towards my pension plan. ,228 ,924

In Table 2, the factor analysis for the non-monetary incentives is shown. The pattern for non-monetary incentives can partly be explained by the lack of company car offered to the employee. 68,5% of the respondents answered ’very dissatisfied’ for the questions related to the company car. Since I do not have information on whether respondents had a company car, I have chosen to drop the car-related questions. The Cronbach alpha of the final construct excluding the car-related questions is 0,896.

Some variables are difficult to interpret because they may load onto more than one factor which is known as split loadings. These variables may correlate with each another to produce a factor despite having little underlying meaning for the factor (Tabachnick & Fidell, 2007). For example trainings items load to two components as well, however the Cronbach’s alpha would be lower if I deleted it.

TABLE 2 Factor analysis: non-monetary incentives

Component

1 2

Social events organized by the organization. ,895 ,135

Amount the organization spends on social events. ,882 ,162

The number of social events organized. ,818 ,209

Facilitation of sport by the organization. ,179 ,873

Amount the organization spends on facilitating sport. ,118 ,902 Trainings and opportunities to develop your skills. ,594 ,568 The amount the organization spends on trainings. ,591 ,580

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24 The pattern for the types of motivation indeed shows the continuum from intrinsic to extrinsic motivation. However, the second type which is identified motivation is seems not be considerably different from intrinsic motivation.

TABLE 3 Factor analysis: types of motivation

Component

1 2 3

Because I enjoy this work very much. ,885 ,237 -,071

Because I have fun doing my job. ,878 ,232 -,072

For the moments of pleasure that this job brings me. ,833 ,329 ,056 I chose this job because it allows me to reach my life goals. ,785 ,187 ,310

Because this job fulfils my career plans. ,756 ,235 ,321

Because this job fits my personal values. ,806 ,296 ,115

Because I have to be the best in my job, I have to be a “winner”. ,493 ,715 ,143 Because my work is my life and I don’t want to fail. ,317 ,859 ,031

Because my reputation depends on it. ,202 ,880 ,194

Because this job affords me a certain standard of living. ,322 ,194 ,832 Because it allows me to make a lot of money. ,248 ,194 ,844

I do this job for the pay check. -,243 -,045 ,791

For the items of interpersonal relationship only the component matrix could be assessed because all items load one factor, which is on one hand is a problem because it supposed to measure two different thing but on the other hand, it seems that co-worker and supervisor satisfaction are not that different in the given answers.

TABLE 4 Factor analysis: interpersonal satisfaction

Component 1

The people I talk to and work with on my job. ,684

The chance to get to know other people while on the job. ,803

The chance to help other people while at work. ,774

The degree of respect and fair treatment I receive from my boss. ,847 The amount of support and guidance I receive from my supervisor. ,851 The overall quality of supervision I receive in my work. ,795

4.3.2. Demographic statistics

Table 5 present demographic statistics of the participants in my study. The total number of the respondents were 162: 57,4% male and 42,6% female. As for the age and tenure I asked them to choose one interval. Furthermore, the profile of the organization indicates in which

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25 industry their organizations work (The 9,3% who chose ’other’ clarified their fields like airport security, tourism, building construct). Respondents should have also given an answer whether their organization works for profit or government/non-profit and chose whether their worked under a permanent contract arrangement, had a temporary contract, or had no contract. For this latter control variable: type of contract, I created a dummy variable making difference between permanent and temporary & no contract groups. The sample is quite representative regarding demographic measures, there are no over presence of any of the categories and all categories are represented (except for the people under 18).

TABLE 5 Demographic statistics

Gender Female 69 42,6% Male 93 57,4% Σ 162 100,0% Age Less than 18 0 0,0% 18-24 56 34,6% 25-34 38 23,5% 35-44 28 17,3% 45-54 25 15,4% 55-64 11 6,8% More than 65 4 2,5% Σ 162 100,0% Type of contract Permanent 127 78,4% Temporary 27 16,7% No contract 8 4,9% Σ 162 100,0% Organisation profile Manufacturing 24 14,8% Consumer services 39 24,1% Business services 37 22,8% Financial services 25 15,4% Social services 22 13,6% Other 15 9,3% Σ 162 100,0% Organisation type Profit 131 80,9% Gov./non-profit 31 19,1% Σ 162 100,0% Tenure

Less than 1 year 48 29,6%

1-3 years 35 21,6%

3-5 years 11 6,8%

5-7 years 14 8,6%

7-10 years 13 8,0%

More than 10 years 41 25,3%

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26

4.3.3. Descriptive statistics

The descriptive statistics of the composite variables are summarized in Table 6. A single composite measure was formed for each of the constructs by averaging employees’ responses to the items contained in the scale. The table depicts the Cronbach’s alpha1 for

the variables of the construct. The Cronbach’s alpha is higher than 0,7 for all the variables, which gives us a reliable construct. In the second column the number of question items taken into account is shown.

Respondents are slightly satisfied with their monetary incentives, its mean is just above the median (mean=3,8160), however, they are more satisfied with their monetary incentives than with their non-monetary incentives (mean=3,0540). These numbers are quite low. As far as the types of motivations are concerned, respondents’ answers reflect that the enjoyment of the work presently correspond to their reasons more than working for the money. The mean of intrinsic motivation is 4,4383, while the mean of extrinsic motivation is 3,7243. The measured two other types of motivations: identified and introjected are between the means of intrinsic and extrinsic motivation. The table also shows that the employees are more satisfied with the interpersonal relationships with their co-workers (mean=4,8827) than with their supervisor (mean=4,2325).

TABLE 6 Descriptive statistics

Cronbach's Alpha

N of

Items N Minimum Maximum Mean

Std. Deviation Monetary incentives 0,932 10 162 1,00 7,00 3,816 1,165 Non-monetary incentives 0,896 8 162 1,00 6,00 3,054 1,324 Intrinsic motivation 0,940 3 162 1,00 7,00 4,438 1,536 Identified motivation 0,888 3 162 1,00 7,00 4,029 1,625 Introjected motivation 0,876 3 162 1,00 7,00 3,444 1,657 Extrinsic motivation 0,792 3 162 1,00 7,00 3,724 1,454 Co-worker satisfaction 0,797 3 162 1,00 7,00 4,883 1,305 Supervisor satisfaction 0,881 3 162 1,00 7,00 4,233 1,552

1 Cronbach α (alpha) is a measure or coefficient of reliability. It gives an indication of the reliability of the research

instruments employed and it normally ranges between 0 and 1. The closer Cronbach α is to 1 the greater the internal consistency of the items in a scale. It’s a rule of thumb among research scientists that the Cronbach α of a research instrument should be at least 0.5, though this coefficient of reliability should rather be above 0.7.

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27 After a careful analysis of the data, I found no respondents who answered all the questions with 1 or 7. There were only a few extreme answers, like one person gave 2 for everything except for interpersonal questions. And another who gave 1 for all the motivation questions. There is another type of motivation other than the examined ones, which is amotivation. It occurs when an individual has very low levels of motivation towards any given task. The individual will display neither intrinsic nor extrinsic based behaviour (O’Connor & Vallerand 1989). However, that these cases were not considered to threat the validity and bias the result of the study.

4.3.4. Correlation

In Table 7 the Pearson and the non-parametric Spearman correlations are shown. I included all the correlations between the variables and the demographics. A Dummy variable was used for the gender (female 0, male 1), type of contract (permanent 0, temporary with no contract 1) and type of organization (for profit 0, government/non-profit 1). According to the correlation matrix, it seems that males are more satisfied with their incentives, both monetary and non-monetary and with their supervisor. The older the respondent is, the more likely that they are working at their current workplace for a longer time, they have a permanent contract and the correlation matrix says that the older the respondent is, the more likely that he or she works in a government or non-profit organization. However, they are less satisfied with their non-monetary incentives and supervisors than younger respondents. Looking at the type of contract we can conclude that those people who have a temporary contract (e.g. internship) or have no contract are more satisfied with the non-monetary incentives and with their supervisors.

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28 TABLE 7 Pearson and Spearman correlation

Gender Age Tenure Type of org. Type of cont. Monetary Non-monetary Intrinsic Identified Introjected Extrinsic Co-worker Supervisor

Gender 1 -,331 ** -,266** -,247** ,210** ,221** ,279** ,040 ,071 ,088 ,180* ,005 ,204** ,000 ,001 ,002 ,007 ,005 ,000 ,609 ,367 ,266 ,022 ,954 ,009 Age -,293 ** 1 ,740** ,334** -,363** ,013 -,359** ,072 ,032 ,200* -,088 -,049 -,210** ,000 ,000 ,000 ,000 ,866 ,000 ,364 ,690 ,011 ,266 ,533 ,007 Tenure -,263 ** ,740** 1 ,245** -,474** ,081 -,263** ,073 -,008 ,099 -,051 -,062 -,239** ,001 ,000 ,002 ,000 ,306 ,003 ,356 ,922 ,210 ,519 ,431 ,002 Type of organization -,247** ,319** ,225** 1 -,141 -,033 -,157* ,071 -,001 ,072 -,150 ,097 -,045 ,002 ,000 ,004 ,074 ,676 ,083 ,368 ,990 ,365 ,058 ,220 ,573 Type of contract ,210** -,337** -,432** -,141 1 ,077 ,230** ,045 ,106 -,034 ,133 ,092 ,228** ,007 ,000 ,000 ,074 ,332 ,003 ,569 ,181 ,665 ,092 ,245 ,004 Monetary ,231 ** ,001 ,085 -,027 ,082 1 ,457** ,407** ,464** ,328** ,526** ,307** ,379** ,003 ,986 ,282 ,733 ,300 ,000 ,000 ,000 ,000 ,000 ,000 ,000 Non-monetary ,294** -,361** -,251** -,160 ,213** ,477** 1 ,356** ,442** ,257** ,354** ,413** ,623** ,000 ,000 ,006 ,088 ,004 ,000 ,000 ,000 ,000 ,000 ,000 ,000 Intrinsic ,032 ,082 ,092 ,066 ,016 ,419 ** ,383** 1 ,765** ,578** ,094 ,488** ,527** ,687 ,297 ,244 ,406 ,837 ,000 ,000 ,000 ,000 ,234 ,000 ,000 Identified ,074 ,040 ,031 -,002 ,096 ,487 ** ,450** ,772** 1 ,615** ,311** ,504** ,535** ,347 ,614 ,695 ,978 ,226 ,000 ,000 ,000 ,000 ,000 ,000 ,000 Introjected ,091 ,235 ** ,115 ,078 -,038 ,346** ,254** ,594** ,610** 1 ,273** ,494** ,386** ,251 ,003 ,144 ,323 ,628 ,000 ,000 ,000 ,000 ,000 ,000 ,000 Extrinsic ,166 * -,074 -,010 -,138 ,131 ,565** ,366** ,146 ,356** ,288** 1 ,181* ,272** ,034 ,346 ,897 ,079 ,097 ,000 ,000 ,064 ,000 ,000 ,021 ,000 Co-worker -,004 ,010 -,034 ,048 ,078 ,386 ** ,437** ,498** ,544** ,488** ,239** 1 ,675** ,959 ,898 ,671 ,545 ,324 ,000 ,000 ,000 ,000 ,000 ,002 ,000 Supervisor ,197 * -,160* -,196* -,053 ,209** ,436** ,619** ,518** ,538** ,395** ,318** ,659** 1 ,012 ,043 ,013 ,505 ,008 ,000 ,000 ,000 ,000 ,000 ,000 ,000

Pearson correlations appear below the diagonal, non-parametric Spearman correlations appear above the diagonal

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29 Regarding monetary incentives, it has a positive and statistically significant correlation with non-monetary incentives, all types of motivation and both interpersonal satisfaction variable. It is also presented that this correlation is more positive for extrinsic motivation than for intrinsic (b=0,407 for intrinsic and b=0,526 for extrinsic p<0,01). The satisfaction of non-monetary incentives also positively and significantly correlates with interpersonal satisfaction and the types of motivation, however there is no significant difference between intrinsic and extrinsic (b=0,356 for intrinsic and b=0,354 for extrinsic p<0,01), it is only higher for identified motivation.

Concerning the types of motivations, the correlation matrix presents that all types are significantly, positively correlated with each other except for intrinsic with extrinsic motivation. The correlation between intrinsic and identified motivation is quite high, (b=0,765 p<0,01). This number is somewhat less between intrinsic and introjected (b=0,578 p<0,001).

At last but least, considering the two types of interpersonal satisfaction it turns out that there is a significant and positive relationship between the satisfaction of co-workers and supervisor (b=0,675 p<0,01).

4.3.5. Regression analysis

I ran a set of regressions to test the hypotheses. Control variables were used in each of the analyses, these were: gender, age, tenure, organization profile (manufacturing, financial services and so on), type of organization (for profit, government) and type of contract (permanent or temporary/no contract). It was necessary to ensure equivalence between the control variables so that the differences only came as a result of the independent variables.

In step 1 I only tested the control variables. In step 2 I added the satisfaction of monetary incentives. In step 3 the satisfaction of co-workers was also used, while in step 4 the satisfaction of the supervisor. These three steps were then repeated but with the satisfaction of non-monetary incentives (for step 5, 6 and 7).

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30 TABLE 8 Regression analysis

Intrinsic Identified

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Gender ,069 -,041 ,004 -,057 -,025 ,016 -,036 Gender ,083 -,045 ,003 -,059 -,018 ,026 -,028

Age ,029 ,065 ,026 ,049 ,192 ,100 ,095 Age ,059 ,101 ,060 ,087 ,241 ,143 ,154

Tenure ,103 -,008 ,059 ,092 ,052 ,097 ,133 Tenure ,063 -,066 ,004 ,025 -,001 ,048 ,071 Type of org. ,059 ,050 ,034 ,042 ,064 ,043 ,049 Type of org. ,003 -,007 -,025 -,015 ,009 -,014 -,005 Type of contr. ,065 ,015 ,002 -,025 ,005 ,005 -,014 Type of contr. ,126 ,068 ,054 ,032 ,049 ,050 ,032

Monetary ,429** ,260** ,224** Monetary ,497** ,320** ,310** Non-monetary ,482** ,280** ,191* Non-monetary ,533** ,317** ,272** Co-worker ,398** ,375** Co-worker ,417** ,404** Supervisor ,465** ,453** Supervisor ,425** ,408** R2 ,019 ,186 ,317 ,348 ,208 ,315 ,330 R2 ,022 ,248 ,391 ,383 ,252 ,375 ,350 Adjusted R2 -,012 ,155 ,286 ,318 ,178 ,284 ,299 Adjusted R2 -,009 ,218 ,363 ,355 ,223 ,347 ,321 F ,605 5,921 10,197 11,741 6,798 17,090 17,902 F ,716 8,499 14,118 13,642 8,693 13,219 11,852 p ,696 ,000 ,000 ,000 ,000 ,000 ,000 p ,612 ,000 ,000 ,000 ,000 ,000 ,000

** Significant at the 0.01 level (2-tailed) * Significant at the 0.05 level (2-tailed)

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31

Introjected Extrinsic

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Gender ,174 ,085 ,133 ,073 ,097 ,142 ,089 Gender ,134 -,009 -,006 -,011 ,069 ,081 ,065 Age ,358* ,387** ,346** ,376** ,484** ,383** ,412** Age -,081 -,035 -,037 -,037 ,044 ,017 ,010 Tenure -,110 -,200 -,130 -,125 -,137 -,086 -,077 Tenure ,164 ,020 ,025 ,036 ,111 ,125 ,139 Type of org. ,032 ,025 ,007 ,019 ,036 ,013 ,025 Type of org. -,098 -,109 -,111 -,111 -,094 -,100 -,099 Type of contr. ,003 -,037 -,051 -,067 -,012 -,012 -,026 Type of contr. ,133 ,069 ,068 ,062 ,060 ,060 ,053

Monetary ,347** ,168 ,194 Monetary ,557** ,545** ,525** Non-monetary ,375** ,152 ,159 Non-monetary ,362** ,302** ,261* Co-worker ,419** ,415** Co-worker ,029 ,113 Supervisor ,347** ,336** Supervisor ,074 ,158 R2 ,090 ,199 ,344 ,289 ,205 ,335 ,272 R2 ,057 ,340 ,341 ,344 ,159 ,168 ,174 Adjusted R2 ,060 ,168 ,314 ,256 ,174 ,305 ,239 Adjusted R2 ,027 ,314 ,311 ,314 ,126 ,131 ,136 F 3,068 6,412 11,512 8,931 6,670 11,104 17,188 F 1,902 13,311 11,372 11,542 4,873 4,453 4,618 p ,011 ,000 ,000 ,000 ,000 ,000 ,000 p ,097 ,000 ,000 ,000 ,000 ,000 ,000

** Significant at the 0.01 level (2-tailed) * Significant at the 0.05 level (2-tailed)

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32 The satisfaction of monetary and non-monetary incentives shows a significant positive relationship with intrinsic, identified, introjected and extrinsic motivation (step 2 and 5). Therefore, hypothesis 1 is supported: incentive satisfaction is positively associated with the overall level of motivation. The coefficient for the satisfaction of non-monetary incentives (b=0,482) is higher than for monetary incentives (b=0,429) at the 0,01 level when intrinsic motivation is the dependent variable. In contrary, these results are the reverse for extrinsic motivation and the difference is more significant at the 0,01 level (monetary incentives b=0,557, non-monetary incentives b=0,362). These numbers does not show difference for identified motivation, and for introjected it follows intrinsic motivation’s the pattern. Moreover, age turned out to be a significant control variable for introjected motivation. Although I cannot compare the different results among dependent variables, the pattern of the correlations and the regressions are likely to convince that monetary incentives satisfaction is more positively associated with extrinsic motivation than with intrinsic motivation and non-monetary incentives satisfaction has a more positive influence on intrinsic motivation than on extrinsic motivation. Therefore, based on my analysis, I cannot say whether to accept or reject hypotheses 2 and 3.

In step 3, 4 and 6, 7 the co-worker and supervisor satisfaction was taken into the regression analysis. For intrinsic motivation all the independent variables turned out to be significant. For both types of incentives the coefficients for the satisfaction of supervisors is higher than the satisfaction of co-workers which means that if the relationship with the colleagues is better, the employee is more motivated but the employee is even more motivated if the relationship with his or her boss is more satisfactory. Identified motivation has the same pattern. For introjected motivation the types of incentives became insignificant but the interpersonal relationships are not. However, in these cases co-worker satisfaction is higher than supervisor satisfaction (regarding monetary incentives co-worker satisfaction b=0,419, supervisor satisfaction b=0,347, while for non-monetary incentives b=0,415 and b=0,336 respectively at the 0,01 level). Testing for extrinsic motivation resulted in insignificant coefficients for the types of interpersonal satisfaction. Based on these results, hypothesis 4 should be accepted, that interpersonal satisfaction (both types) are positively associated with intrinsic motivation. In addition, identified and introjected motivation also turned out to be positively affected by interpersonal satisfaction.

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33 TABLE 9 Regression analysis to test interaction effect

Intrinsic interaction Identified interaction

Step 1 Step 2 Step 3 Step 4 Step 1 Step 2 Step 3 Step 4 Gender -,023 -,029 -,006 -,013 Gender -,027 -,028 ,001 ,009

Age ,031 ,026 ,070 ,065 Age ,068 ,067 ,122 ,128

Tenure ,096 ,102 ,133 ,145 Tenure ,035 ,036 ,079 ,065

Type of org. ,035 ,025 ,041 ,035 Type of org. -,023 -,024 -,014 -,008 Type of contr. -,018 -,040 -,007 -,012 Type of contr. ,036 ,033 ,037 ,044

Monetary ,195 ,200** Monetary ,270** ,270** Non-mon. ,164 ,152 Non-mon. ,221* ,236** Interpersonal ,491** ,533** ,488** ,510** Interpersonal ,479** ,485** ,479** ,454** Mon*Interp. ,097 Mon*Interp. ,014 Non-mon *Interp. ,050 Non-mon *Interp. -,058 R2 ,369 ,376 ,356 ,358 R2 ,421 ,421 ,394 ,397 Adjusted R2 ,340 ,344 ,326 ,324 Adjusted R2 ,394 ,391 ,367 ,365 F 12,859 11,533 12,147 10,651 F 15,976 13,897 14,315 12,584 p ,000 ,000 ,000 ,000 p ,000 ,000 ,000 ,000

Introjected interaction Extrinsic interaction

Step 1 Step 2 Step 3 Step 4 Step 1 Step 2 Step 3 Step 4 Gender ,101 ,101 ,115 ,118 Gender -,007 -,001 ,075 ,105 Age ,357** ,357** ,373** ,375** Age -,039 -,034 ,004 ,026 Tenure -,108 -,108 -,062 -,067 Tenure ,032 ,027 ,138 ,089 Type of org. ,011 ,011 ,015 ,017 Type of org. -,111 -,101 -,101 -,079 Type of contr. -,067 -,066 -,023 -,021 Type of contr. ,065 ,087 ,056 ,078

Monetary ,141 ,140 Monetary ,529** ,524** Non-mon. ,085 ,090 Non-mon. ,258* ,311** Interpersonal ,433** ,432** ,445** ,436** Interpersonal ,060 ,018 ,159 ,065 Mon*Interp. -,004 Mon*Interp. -,097 Non-mon *Interp. -,022 Non-mon *Interp. -,210** R2 ,341 ,341 ,328 ,328 R2 ,343 ,350 ,174 ,209 Adjusted R2 ,311 ,306 ,298 ,293 Adjusted R2 ,313 ,316 ,137 ,168 F 11,374 9,888 10,741 9,353 F 11,471 10,298 4,647 5,065 p ,000 ,000 ,000 ,000 p ,000 ,000 ,000 ,000

** Significant at the 0.01 level (2-tailed) * Significant at the 0.05 level (2-tailed)

In order to support the trustworthiness of the analysis, for the following regressions I first standardized the variables because when testing interactions the interpretation of coefficients can be slightly simpler. Step 1 stands for the control variables, the satisfaction of non-monetary incentives and the interpersonal relationship together (I computed a new variable for the co-worker and supervisor satisfaction) while in step 2 the interaction of non-monetary and interpersonal satisfaction was tested. I multiplied the non-monetary and interpersonal variables and use this new variable as a predictor in the regression for the

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